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Accounting Concepts
Level
100
200
300
400
500
Answer
Earned and realized or realizable are the
criteria for this principle
Recording expenses in the period in which
they help to generate revenue
Predictive value and feedback value are
characteristics of this
The lower of cost or market rule for valuing
inventory is an example of this constraint to
the basic principles
Using the completed contract method to
account for long-term contracts does not
provides information that is high on this
qualitative characteristic of information
Question
What is the revenue recognition
principle?
What is the matching principle?
What is relevance?
What is conservatism?
What is relevance?
Nothing but Numbers
Level
100
200
300
400
500
Answer
Profit margin if net income is $10,000, sales are
$100,000 and assets are $80,000
Amount of prepaid insurance at December 31st if
a one-year $15,000 insurance policy is paid in
advance on April 30th.
The present value of $121 discounted for two
periods at 10%
Cost of goods sold using LIFO if Cost of Goods
sold using FIFO is $100,000 and the LIFO
reserve decreases by $8,000
Bad debt expense, if the allowance for doubtful
accounts increased by $10,000 and write-offs for
the year were $5,000
Question
What is 10%?
What is $5,000?
What is $100?
What is $92,000?
What is $15,000?
Cause & Effect
Level
Answer
100
The effect on total cash flows of recording
extended warranty contracts using the full
deferral method vs. the partial recognition
method
The effect on net income at the point of a sale if
the sale is recorded using the installment method
of revenue recognition
The effect on total assets of writing off specific
accounts receivable using the allowance method
The effect on future income of overestimating
the percent of uncollectible accounts receivable
in the current year
The effect on cash flows of using a FIFO cost
flow assumption vs. a LIFO cost flow
assumption in periods of rising prices
200
300
400
500
Question
What is no effect?
What is no effect?
What is no effect?
What is increase?
What is decrease?
Accounting Terminology
Level
100
200
300
400
500
Answer
Assigning the most recent inventory purchases to
cost of goods sold
The difference between the current cost of ending
inventory and ending inventory under the last-in,
first-out cost flow assumption
Selling price less disposal costs and costs to
complete
Otherwise known as SPEs
Allowance for doubtful accounts, warranty
reserves, deferred revenue, and restructuring
reserves are potential examples of this, a term
coined by Arthur Levitt, former chairman of the
SEC
Question
What is LIFO (last-in,
first-out)?
What is the LIFO
reserve?
What is net realizable
value?
What are Special Purpose
Entities?
What are “cookie jar
reserves”?
Potpourri
Level
100
200
300
400
500
Answer
Selling more inventory than you purchased in a
given year results in this (when using the LIFO
assumption)
This is used to define “market” when applying the
lower of cost or market rule under IFRS
Using the full deferral method to record extended
warranty contracts rather than the partial
recognition method will result in lower net income
as long as the amount of contract sales is this
Return on assets equals profit margin times asset
turnover
Originally under EITF 00-21, this was required to be
known about the undelivered element in order for
the delivered element to be considered a separate
unit of accounting
Question
What is a LIFO
liquidation?
What is net realizable
value?
What is growing?
What is the Dupont
formula?
What is the fair value?
Case Specific
Level
Answer
200
Company who reported the largest profit in
corporate history
The accounting firm who audited
WorldCom’s financial statements
The method for accounting for extended
warranty contracts outlined in FTB 90-1 (or
605-20-25-3 of the codification)
Because of SFAS No. 2 (or 730-10-25-1 of
the codification), Chemalite was required to
expense the cost of these as incurred.
The name of the WorldCom accounting
manager who subsequently went to work
for a Kentucky Fried Chicken franchise
400
600
800
1000
Question
Who is Exxon?
Who is Arthur
Andersen?
What is the full deferral
method?
The Chemalite
prototypes
Who is Betty Vinson?
Debits & Credits
Level
200
400
600
800
1000
Answer
Entry made to Retained Earnings at year-end if total
revenues is $550,000 and total expenses are $620,000
Entry made to Allowance for Doubtful Accounts if
Accounts Receivables are $100,000, Sales are $500,000,
the estimated percent uncollectible is 3% and the
percentage of sales method is used
Entry made to Inventory if ending inventory at cost is
$56,000, replacement cost is $48,000, net realizable value
is $60,000 and net realizable value less a normal profit
margin is $46,000
Entry made to LIFO Reserve if ending inventory under
LIFO is $20,000, ending inventory under FIFO is $26,000
and the beginning LIFO reserve is a credit of $8,000
Entry made to Cost of Goods Sold in year 1 of a long-term
contract if costs incurred in year 1 are $100,000, remaining
costs to complete are estimated at $150,000, and the
contract price is $200,000
Question
What is debit $70,000
What is credit $15,000
What is credit $8,000?
What is debit $2,000?
What is debit $130,000
More Nothing But Numbers
Level
200
400
600
800
1000
Answer
Cumulative taxes saved from using LIFO if the LIFO
reserve is credited $10,000 in the current year, has an
ending balance of $40,000, and the tax rate is 35%
Interest revenue on a non-interest bearing note receivable
with a $10,000 face value, an unamortized discount of
$2,000 and an effective rate of 7%
Bad debt expense using the percentage of receivables
method if the beginning allowance for doubtful accounts
balance is $10,000, write-offs during the year are $8,000,
the ending accounts receivable balance is $180,000 and
5% of receivables are estimated to be uncollectible
Gross profit recognized in year 2 of a long-term contract if
costs incurred to date are $100,000, remaining costs to
complete are estimated at $50,000, contract price is
$210,000 and profit recognized in year 1 was $15,000
Ending inventory under dollar-value LIFO if beginning
inventory under dollar-value LIFO is $20,000, beginning
inventory at base year prices is $17,000, ending inventory
at current cost is $24,000 and the price index is 1.2.
Question
What is $14,000?
What is $560?
What is $7,000?
What is $25,000?
What is $23,600?
More Cause & Effect
Level
200
400
600
800
1000
Answer
The effect on net income of paying rent in advance
The effect of rising prices on the LIFO reserve
The effect on next year’s net income of overstating ending
inventory in the current year
The effect on assets of recording a progress billing on a
long-term contract
The effect on the debt-to-equity ratio of treating a transfer
of rights on Accounts Receivable as a financing
arrangement
Question
What is no effect?
What is increase?
What is decrease?
What is no effect?
What is increase?
Hawaii Trivia
Level
Answer
200
Hawaii has the highest per capita
consumption of this canned meat
product
“Mele Kalikimaka” is the Hawaiian
version of this holiday greeting
A portion of this island was a former
leper colony
Famous (and very large) Hawaiian
singer who recorded a popular rendition
of “Somewhere Over the Rainbow”
The state fish of Hawaii
400
600
800
1000
Question
What is Spam?
What is Merry Christmas?
What is Molokai?
Who is Israel Kamakawiwaole?
What is Humuhumunukunukuapua’a?